The Hindu Business Line : Palm oil may head higher

MALAYSIAN crude palm oil futures on MDEX ended slightly higher on Friday mainly on soya oil strength. Future prices in the Dalian soyabean contracts hit the three per cent limit on Friday adding more bullish strength to the market.

Crop report from private forecaster, Mr Ivan Wong will be closely watched next week for further clues from here. US soya oil prices weakened during the week, after the USDA projected record US plantings this spring and larger-than-expected US soyabean supplies.

The US Agriculture Department said farmers would plant a record 75.4 million acres (30.52 million hectares) of soybeans. US Department of Agriculture reported US soybean stocks as of March 1 at 906 million bushels above market expectations.

Cargo surveyor Societe Generale de Surveillance estimated Malaysian palm oil exports in March at 978,695 tonnes, up 12 per cent from 873,487 tonnes shipped in February falling in line with market expectations again. SGS estimated last week exports to be at 837,488 tonnes for the period March 1-25.

The third month active June contract continues to move in a range. As observed in the past, narrow range movement always give rise to trading opportunities as a break of the range will ignite a rally from here on either side. We still favour a move higher and therefore, believe a break out on the up side as a possible outcome.

Initial resistance will be seen at 1980 Malaysian ringgit (MYR) a tonne followed by 2003 MYR/tonne a psychological resistance level. The weekly charts, shows a trend-channel resistance at 2025-35 MYR/tonne levels and believe this level should be tested soon.

The rising trend line support now comes at 1925 MYR/tonne level and this should provide good support for the current up trend to sustain. Only a daily close below the fractal bottom at 1865 MYR/tonne will confirm a reversal in trend, which will be followed by a strong correction downwards.

As discussed in our earlier updates, the consolidation from 1865-1660 was a fourth wave move and an impulse fifth wave in progress with minimum target at 2035 MYR/tonne followed by another wave target at 2145 MYR/tonne. The current move to 1865 MYR/tonne is a corrective leg of the fifth wave impulse rally.

RSI is now in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line in the indicator showing strength.

Current prices are higher than the short-term 8-day EMA at 1948 MYR/tonne and the 34-day EMA is now at 1925 MYR/tonne.

Look for prices to head higher. Resistances at 1980, 2005 and 2035 ringgits. Supports at 1925, 1895 and 1865 ringgits.

(The author is employed with the Multi Commodity Exchange of India. The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading.)

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